Despite fears of secular stagnation, the only thing that’s truly stagnant in America today is the traffic. This morning, more Americans will commute to work than ever before, and most of them will drive. However, this isn't a bad thing: In fact, worsening traffic is a visible sign that the US economy’s recovery remains strong and is nearing completion. GDP growth may be disappointing, but the growing congestion on highways provides one more reason to doubt that the economy has entered a sustained period of slow growth and unemployment.
Worsening traffic is closely tied to employment trends. The daily commute makes up the majority of miles driven for most commuters. Total annual vehicle miles in America peaked at just above 3 trillion in 2007, coinciding with the prerecession peak in employment. In the years following the 2008 financial crisis, widespread unemployment pushed total vehicle miles back below the 3 trillion mark, easing the need for new highway construction.
Traffic volume remained relatively constant until 2014, when the labor market regained its recessionary losses and new job growth began creating additional commuters. Since then, the economy has continued to add around 170,000 jobs every month, and the surge of new commuters has placed Americans on pace to travel over 3.2 trillion annual vehicle miles in the near future, testing the capacity of our highway infrastructure.
Those who believe in secular stagnation should be confused by heavy traffic volume. The growing number of people driving to work undoubtedly reflects strong expansion in the workforce. Almost every measure of economic performance outside of GDP growth is healthy, and the issues plaguing GDP estimates are well known. There has been no sign of stagnation in the labor market, the stock market or the real estate market. Even the federal deficit has fallen to a sustainable level, the result of climbing tax receipts.
If job growth continues at its current pace, traffic congestion only stands to get worse. From an economic standpoint, road construction is unusually insensitive to demand. Projects are largely guided by political whims and funded by fuel taxes, a system that creates little incentive to build new capacity where it is most needed. In most cities, commuters bear little of the cost of driving into dense urban centers, where demand for roads and parking spaces is greatest. It's no surprise that cities with steep entry tolls, like New York and San Francisco, have some of the nation’s highest rates of carpooling and public transit usage.
If highway tolls and construction projects were mostly guided by demand for road space, we would likely see a rise in carpooling and public transit, as well as added road capacity where demand is highest. Market forces might make the commute more expensive, but it would be far less miserable. In the meantime, motorists should look on the bright side—full roads today are a sign of full employment on the horizon.
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